FEATURE FRIDAY: Some have high hopes for the speculation tax

Christine Mettler wasn’t surprised when Kelowna’s business community started to lobby against the speculation tax.

Whenever there’s a plan that cuts into the bottom line of B.C.’s wealthiest, she said, the fear mongering begins.

“When we talked about how we need a higher minimum wage, we heard the catastrophizing about how it hurt jobs and the economy despite studies that show how economic activity increases when it comes up,” said Mettler, an Okanagan poverty reduction co-ordinator

“Now it’s this.”

The speculation tax, set to be applied this year, has set off a lot of theorizing about how it could crash the real estate market by putting too much financial pressure on a select group.

B.C. residents who are subject to the tax will pay a rate of 0.5 per cent more property tax; Canadians from outside B.C. who have properties in the province that are subject to the tax will pay a one per cent tax rate, while non-Canadians will continue to pay the previously-announced two per cent rate.

B.C. residents with a vacant second home will be eligible for a non-refundable tax credit that will be applied against the speculation tax. The credit will offset a total of $2,000 in speculation tax payable. This means they will not pay tax on a second home valued up to $400,000.

Owners are also exempt if their property is rented out long-term—this is defined as being rented out for at least six months of the year.

All these changes, estimates the province, could bring in $200 million of yearly tax revenue starting next year and slow what’s been considered an over-heated market.

Mettler said the need to do something to temper the real estate market has long been here and the levy could get to the heart of what has been hurting a great number of Okanagan residents.

Right now Kelowna’s vacancy rental rate is, alongside Abbotsford, the lowest in the country—sitting at 0.2 per cent. When housing of three bedrooms or more is factored in, it’s even lower.

Contrast those figures against the vacant housing supply in this area. In the 2016 Census, Statistics Canada reported that 25 per cent of downtown Kelowna homes sit vacant or are not used as a primary residences. The figure for the Lower Mission was pegged at 17 per cent.

“We have a huge problem where people don’t have access to rental stock and there are houses sitting vacant,” said Mettler.

“This may encourage people to return to their homes or put them on the market and that’s fine. We have a serious availability and affordability crisis…The housing market has turned into a tool people derive profit from at the expense of people who just want a place to live—homes should be for people.”

That’s something she said she’d like local politicians to take a closer look at, as it’s what the majority of their constituents actually struggle with.

The focus, however, has been on market concerns. Local MLAs have raised their concerns for the economy and the mayors of Kelowna and West Kelowna—the only two speculation tax affected markets in the Okanagan—have said they are against the tax, both in its original and revised form for how it could negatively affect property values.

West Kelowna Mayor Doug Findlater met with finance minister Carole James last week, and presented a number of proposals including exempting West Kelowna from the tax.

He argued West Kelowna is unique given it is only 10-years-old and does not have reserves built up to fund important infrastructure upgrades, projects that currently rely heavily on development cost charges—revenue raised from development to pay for public infrastructure. He’s also of the belief that the tax will create an uneven playing field with neighbouring communities that are not impacted by the tax.

Cindy Raftis, an Albertan who owns a second home in Kelowna for over 15 years, said her family spends about 40 per cent of their time in Kelowna and contributes greatly to the economy. The levy, as it was originally pitched, could have put an extra $50,000 cost on top of the property taxes her family already pays and that is definitely causing her to reconsider her life in one of the two affected communities.

“If this tax goes through as proposed, we will consider selling, however, we won’t be alone—we expect that many homes will be put up for sale, thus reducing property values throughout Kelowna,” she said.

“The NDP government has stated that the tax may be avoided by people making their second homes available for long-term rental. Realistically, this makes no sense for people like us who occupy their homes for a good portion of the year. And, we don’t believe that government should put people in a position that forces them to rent out their homes in order to avoid a huge tax.”

If it could make the market more equitable, Mettler doesn’t see the harm.

Through her work with the BC poverty prevention coalition, she’s recently seen the results of a survey given to local residents who face poverty.

“Some of their answers are heartbreaking,” she said.

“I’ve read, ‘I had to move into a shelter because I can’t afford rent anymore’ and ‘I’ve worked my whole life. Now I live in a shelter,’” she said. “So, sorry to the people who have to pay more money, but the people who own two or more houses are not more important than people who need primary residences.”